Leading Indicators: Key Economies and the BRICs

A month ago, I examined the information content of the OECD's Composite Leading Indicators. The August release (for June data) is out. There's substantial variation in the implied outlook across economies.

The documentation for the CLI are here, while an econometric evaluation of the CLI by Fichtner, Reuffer and Schnatz is here.

Notice that indeed things are looking up in the BRICs (Brazil, Russia, India, China), with perhaps the exception of Russia. Or, more accurately, things are looking less bad in those countries.

To keep things in perspective, 2008 US GDP (evaluated at market exchange rates) was about 23.5% of world GDP (all ratios from April 2009 IMF World Economic Outlook database), while these three economies in aggregate accounted for 54% of world GDP. The BRICs accounted for 14.6%. China is 7.3% of world GDP, so even with growth resuming, something else will be needed to get world growth back to near normal rates [1].

From today’s FT:
ECB under pressure to tackle ‘crazy’ euro
Pressure is mounting on the European Central Bank to take action against a persistently strong euro with a leading industrialist calling on Frankfurt to tackle the “crazy” strength of the currency.
…

Recent indications are that, in the face of declining inflation, the ECB’s Draghi is considering embarking upon quantitative easing. Despite the technical difficulties accompanying such a measure [0] I believe additional stimulative measures are nonetheless called for.

Follow ZeroHedge in Real-Time on FinancialJuice ‘The bigger they are, the harder they fall’ has always been true and is seemingly even more so today with regard to the BRICs (Brazil, Russia, India and China).

Economic momentum in the world's leading industrialised countries slowed in August when a key index showed "negligible or negative growth," the OECD said Monday."OECD composite leading indicators (CLI) for August 2010 reinforce signals of slowing economic expansion already seen" in July, the Organisation for Economic Cooperation and Development said.The OECD area CLI slipped 0.1 point in August, the fourth month of "negligible or negative growth," it said.

Beijing (AFP) - Chinese manufacturing activity fell into contraction in August, an official index showed on Monday, the figure slumping to a three-year low in the latest sign of slowing growth in the world's second-largest economy.

From an article in the newest issue of GlobalAsia:
Only a few months ago, policymakers around the world were confronted with a series of challenges that, while substantial, seemed relatively well defined. International organizations such as the International Monetary Fund and the Organization for Economic Cooperation and Development highlighted the challenges of a two-speed recovery: emerging markets racing ahead, advanced economies plodding along.